Dow Jones industrial average up 144.32 points, or 1.57 percent, to 9,325.01. It was the first time the Dow had back-to-back gains since the end of September.
Stocks soared while expecting a Fed rate cut. The Dow closed at 9,065.12, a gain of 889.35 or 10.88%. Crude oil is still falling. It closed at $62.73. Consumer confidence is at a low point. Some analysts believe it’s the start of a consumer-led recession, but ultimately the problem rests with the banks and their derivatives schemes for making a quick buck.
Many US businesses are cutting jobs. I don’t know about you guys, but my freelance work from the US has also been cut down. Not completely, but by 30%. It might be cut down even further. Still, this gives me the opportunity of exploring other forms of freelancing and other gigs that I couldn’t pursue while writing 5 posts a day for one site. Spending is also stalled. As with most hard times, people are cutting back everywhere. This is forcing Americans to reevaluate their priorities and come up with new solutions. I’m glad I don’t have a mortgage right now. I used to, but we sold in 2006 when we left for Asia.
GM cutting down on SUVs. GM shares are down 76% as of this Friday. Workers are stunned that SUV plants are shutting down. Americans finally realize that SUVs aren’t the best cars.
The markets had another brutal day Friday. The Asian markets got crushed. Germany and England were down more than 5 percent. In the hours before the United States markets opened, all the signals suggested it was going to be the worst day yet in the crisis. The Dow dropped more than 400 points at the opening, but thankfully it never got any worse.
Currencies markets plunge. Money fled from emerging currencies into dollars and yens. The Dow was initially down almost 450pts (-5%) but managed to rally to a loss of 312.30 for the day. The Dow is at 8,378.95, a loss of 3.59%.
The bad news started early Friday in Tokyo and Seoul, where big companies like Toyota, Sony and Samsung disappointed investors with their earnings.
Oil prices fell 5 percent, to $64.15. OPEC announced that it was cutting output. Some countries in OPEC like Saudi Arabia can live with this decline, into the $55-60 range, but others like Venezuela need a lot more. Chavez needs at least $100 a barrel. Tough times ahead for those countries. Honestly, Canada’s production isn’t that great, but lower oil prices are a wake-up call for those countries relying on the $145 a barrel from July 2008.
Citadel hedge fund in trouble. With a loss $180 billion in the last three months in the hedge fund market, Citadel is having a hard time explaining their financial health.
Iceland wants more tourists. They say that prices are 50% lower than last year, but I just checked for a return flight from Toronto to Iceland and it was $5,300 during the holidays. At $530, I would have considered it. My guess is that they are trying to milk money, but they need to cut it further than that to attract customers. Actually, departing from Quebec, the lowest fare for that flight I could find was $905CAD for a 30-hour flight. (A 12-hour flight via Air Canada was $1162) Varying your departure dates will net you a steep saving. You can get a $813 flight a few days before. Thinking about this, you might be able to find even cheaper.
Investors continue to flee hedgefunds. In the last three months, hedgefunds have lost $180 billion. Hedgefunds are supposed to make money in bear and bull markets. The average fund lost 17.6%. Many wealthy individuals are flabbergasted by their losses. Many managers are quitting their funds.
The next article in The Reckoning is up over at the NYTimes. Treasury Secreatry Henry M. Paulson Jr. tells the story. One of the biggest problems was the bankruptcy of Lehman Brothers, one of the largest institutions issuing commercial papers. The credit market was crushed.
Commercial paper is sometimes described as the lubricant that keeps modern economies moving, and the amount of commercial paper issued has increased rapidly in recent years.
But as the credit crisis took hold in 2007 and deepened in 2008, the commercial paper market began to dry up. In October 2008, the market for that kind of debt all but shut down, with many major corporations unable to borrow for longer than a day at a time, as banks become more fearful of giving out cash. The volume of such debt totaled about $1.6 trillion as of Oct. 1, down 11 percent from three weeks earlier.
In response, the Federal Reserve on Oct. 7 announced a radical plan to buy large amounts of the notes directly in the hope of restoring liquidity to the commercial paper market and thereby to the credit markets at large. The purchases, to be conducted through a newly created Commercial Paper Funding Facility, would put large amounts of taxpayer money at risk, but reflect the Fed’s dire assessment of the threat to the economy.
Today, stocks surged in the last hour. The Dow gained 401.35 to 8,979.26, a gain of 4.68%. European markets were down about 5% in response to the Dow’s 7% drop of yesterday.
